Deck 10: Standard Costing and Variance Analysis

Question 1

Standard costing can be used for both job order and process costing systems.

Answer 1

True

Question 2

Due to the nature of the procedures involved, service companies do not use standard costing.

Answer 2

False

Question 3

Standard costing assumes that a company is producing 100% efficiently and allocates estimated costs appropriately.

Answer 3

False

Question 4

Under standard costing, the inventory account balance may not actually reflect the true costs incurred to acquire the inventory.

Question 5

Planning to purchase materials in bulk amounts will affect the standard price for direct materials.

Question 6

Health insurance and other benefits are part of the calculation of the standard price for direct labor.

Question 7

Variable overhead is generally combined with fixed overhead in standard costing.

Question 8

The flexible budget variance is equal to the difference between actual costs incurred and budgeted costs.

Question 9

The amount of direct materials purchased is usually equal to the amount of direct materials used in production that period.

Question 10

The direct materials price variance is found by the following equation: Actual Quantity Used in Production × (Actual Price - Standard Price)

Question 11

A direct materials price variance is unfavorable if the price paid per unit is greater than the standard price per unit.

Question 12

Using higher-quality materials in production can help to reduce an unfavorable direct materials efficiency variance.

Question 13

Unlike direct materials, the sum of all the direct labor variances is always equal to the flexible budget variance.

Question 14

A negative direct labor efficiency variance is considered favorable.

Question 15

For direct labor, if the efficiency and rate variances are both negative, then the flexible budget variance will be unfavorable.

Question 16

The total number of hours worked by employees is always directly tied to the total level of production.

Question 17

The calculations for variable overhead variances are significantly different from those for direct labor variances.

Question 18

The actual cost of variable overhead is determined by multiplying the actual driver usage by the actual variable cost rate.

Question 19

The standard cost of variable overhead is equal to the standard variable overhead application rate multiplied by the standard driver usage at the given level of production.

Question 20

The actual cost of variable overhead is equal to the standard cost of variable overhead plus any unfavorable variances and minus any favorable variances.

Question 21

Sometimes a firm may allocate a portion of period-end variances to the Work in Process Inventory account.

Question 22

When an unfavorable variance occurs, it normally debited to the Work in Process Inventory account.

Question 23

Even when a variance occurs, inventory is carried on the books (in both Work in Process Inventory and Finished Goods Inventory) at standard cost.

Question 24

A net unfavorable variance decreases Cost of Goods Sold.

Question 25

Recording variances for direct labor requires two separate journal entries: one for the rate variance, and one for the efficiency variance.

Question 26

When direct materials are requisitioned into production, a price variance may need to be recorded.

Question 27

The amount credited to Wages Payable for direct labor is the actual cost, rather than the standard cost.

Question 28

Reasons for using standard costing include:

A) Comparing projected costs against actual costs
B) Planning and budgeting purposes
C) Setting prices in advance
D) Identifying specific areas for process improvement
E) All of the above

Question 29

Standard costing can be used to apply costs for which of the following?

A) Direct Materials
B) Direct Labor
C) Indirect Materials and Indirect Labor
D) Factory Utilities
E) All of the above can be applied using standard costing

Question 30

Reasons for using standard costing include their usefulness in:

A) Preparing flexible budgets
B) Preparing master budgets
C) Establishing selling prices
D) Preparing performance reports
E) All of the above

Question 31

Which of the following could be a variance that would be highlighted through standard costing?

A) Wage increases
B) Materials price increases
C) Excess overtime hours
D) Fixed cost reductions
E) All of the above

Question 32

The standard direct material cost is equal to:

A) Standard quantity × Actual price
B) Actual quantity × Standard price
C) Actual quantity × Actual price
D) Standard quantity × Standard price
E) None of the above

Question 33

The standard direct labor per-unit cost is equal to:

A) Standard hours × Standard wage rate
B) Expected hours × Standard wage rate
C) Actual hours × Expected wage rate
D) Expected hours × Actual wage rate
E) None of the above

Question 34

The standard variable overhead per-unit cost is equal to:

A) Standard total overhead application rate × Standard capacity
B) Standard total overhead application rate × Actual capacity
C) Standard variable overhead application rate × Standard capacity
D) Standard variable overhead application rate × Actual capacity

Question 35

Which of the following factors would most likely not influence the standard level of variable overhead capacity?

A) Market demand levels
B) Machine performance levels
C) Engineering studies
D) Employee performance
E) All of the above affect the level of variable overhead capacity.

Question 36

Which of the following accurately represents the "split cost" for analyzing the direct materials flexible budget variance?

A) Actual Quantity × Standard Price
B) Actual Quantity × Actual Price
C) Standard Quantity × Actual Price
D) Standard Quantity × Standard Price
E) None of the above

Question 37

The difference between the split cost and the actual cost for direct materials is called the:

A) Materials Efficiency Variance
B) Materials Usage Variance
C) Materials Budget Variance
D) Materials Price Variance
E) None of the above

Question 38

The difference between the split cost and the standard cost for direct materials is called the:

A) Materials Price Variance
B) Materials Usage Variance
C) Materials Efficiency Variance
D) Materials Budget Variance
E) None of the above

Question 39

The equation to calculate the direct materials price variance is:

A) AQ × (SP - AP)
B) SP × (AQ - SQ)
C) AP × (AQ - SQ)
D) SQ × (AP - SP)
E) None of the above

Question 40

What is the simplified equation for calculating the direct labor rate variance?

A) AH × (SR - AR)
B) SH × (AR - SR)
C) SH × (SR - AR)
D) AH × (AR - SR)
E) None of the above

Question 41

How is the split cost for direct labor calculated?

A) AH × AR
B) SH × AR
C) AH × SR
D) SH × SR
E) None of the above

Question 42

The sum of the direct labor rate and efficiency variances is equal to:

A) The Flexible Budget Variance
B) The Split Cost
C) The Standard Cost
D) The Actual Budget Variance
E) None of the above

Question 43

The difference between the Actual cost and the Standard cost for direct labor is called:

A) Direct Labor Rate Variance
B) Direct Labor Flexible Budget Variance
C) Direct Labor Efficiency Variance
D) Direct Labor Split Variance
E) None of the above

Question 44

The Standard Cost Driver usage for variable overhead can be calculated as:

A) Split Cost / Actual Application Rate
B) Split Cost / Standard Application Rate
C) Actual Cost / Standard Application Rate
D) Standard Cost / Actual Application Rate
E) None of the above

Question 45

The variable overhead rate variance is calculated as:

A) The difference between Actual Costs and Split Costs
B) The difference between the actual and standard rates, multiplied by the actual driver usage
C) The difference between the actual and standard rates, multiplied by the standard driver usage
D) The difference between Actual Costs and Standard Costs
E) None of the above

Question 46

Which of the following could cause a negative variable overhead efficiency variance?

A) Having a variable overhead cost greater than expected for the given driver usage
B) Having driver usage greater than expected for the given level of production
C) Having variable overhead costs less than expected for the given driver usage
D) Having driver usage less than expected for the given level of production
E) All of the above

Question 47

Which of the following could cause a variable overhead flexible budget variance?

A) Variable overhead costs being greater than expected for the given driver usage
B) Variable overhead costs being less than expected for the given driver usage
C) Driver usage being greater than expected for the given level of production
D) Driver usage being less than expected for the given level of production
E) All of the above

Question 48

Which of the following accounts is always part of the closing entry for variances?

A) Wages Payable
B) Work in Process
C) Cost of Goods Sold
D) Finished Goods
E) Three of the above

Question 49

Which of the following accounts could be affected by the closing entry for a significant variance?

A) Wages Payable
B) Work in Process
C) Finished Goods
D) Cost of Goods Sold
E) Three of the above

Question 50

When are variances normally closed to Cost of Goods Sold?

A) At the end of each month
B) As products are sold
C) When the variance occurs
D) During year-end closing
E) None of the above

Question 51

Under Standard Costing, and assuming a perpetual inventory system, when are standard costs of inventory transferred to Cost of Goods Sold?

A) As products are sold
B) During year-end closing
C) At the end of each month
D) When variances occur
E) None of the above

Question 52

In recording variable overhead application, when there is a higher rate paid and greater driver usage than expected, the entry includes a:

A) CREDIT to Variable Overhead Spending Variance
B) DEBIT to Work in Process Inventory
C) DEBIT to Manufacturing Overhead
D) CREDIT to Variable Overhead Efficiency Variance
E) None of the above

Question 53

In recording the accrual of Wages, if less-skilled workers are employed than were planned for, the entry would most likely include a:

A) CREDIT to Direct Labor Rate Variance
B) DEBIT to Direct Labor Rate Variance
C) DEBIT to Direct Labor Flexible Budget Variance
D) CREDIT to Direct Labor Efficiency Variance
E) None of the above

Question 54

When materials are purchased, which of the following accounts could be affected?

A) Direct materials efficiency variance
B) Work in Process Inventory
C) Direct materials price variance
D) Variable Overhead efficiency variance
E) Two of the above

Question 55

Assuming that variable overhead is applied to each job as it is completed, when is the variable overhead spending variance recorded?

A) When each job is completed
B) When preparing period-end financial statements
C) When direct labor is recorded
D) When the variable overhead costs are incurred
E) None of the above

Question 56

Berghof Foods manufactures various gourmet ethnic food products. Production of its specialty hummus requires a half pound of material per container, which costs $12 per pound and requires 45 minutes (i.e., 0.75 hour) of direct labor. Direct labor costs $20 per hour; the variable overhead rate is $10 per direct labor hour; and the fixed overhead rate is $6 per direct labor hour.
What is the standard cost for each container of specialty hummus produced?

A) $21.00 per container
B) $28.50 per container
C) $33.00 per container
D) $48.00 per container
E) None of the above

Question 57

Lolich Clothing manufactures a single style of designer jeans. Each pair is hand cut and hand sewn with unique designs. Production of each pair requires 2 yards of material, which costs $17 per yard, and requires 3 hours of direct labor. Direct labor costs $15 per hour; the variable overhead rate is $7 per direct labor hour; and the fixed overhead rate is $3.50 per direct labor hour.
What is the standard cost for each pair of designer jeans produced?

A) $42.50 per pair
B) $79.00 per pair
C) $100.00 per pair
D) $110.50 per pair
E) None of the above

Question 58

Use the following information to answer Questions below.
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the materials price variance.

A) $620 F
B) $620 U
C) $180 F
D) $180 U
E) None of the above

Question 59

Use the following information to answer Questions below.
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the materials efficiency variance.

A) $780 U
B) $780 F
C) $800 U
D) $800 F
E) None of the above

Question 60

Use the following information to answer Questions below.
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the labor rate variance.

A) $1,200 F
B) $1,200 U
C) $1,290 F
D) $1,290 U
E) None of the above

Question 61

Use the following information to answer Questions below.
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the labor efficiency variance.

A) $4,410 U
B) $4,410 F
C) $4,500 F
D) $4,500 U
E) None of the above

Question 62

Use the following information to answer Questions below:
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the materials price variance.

A) $245 F
B) $245 U
C) $250 F
D) $250 U
E) None of the above

Question 63

Use the following information to answer Questions below:
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the materials efficiency variance.

A) $585 U
B) $585 F
C) $590 U
D) $590 F
E) None of the above

Question 64

Use the following information to answer Questions below:
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the labor rate variance.

A) $950 F
B) $950 U
C) $1,000 F
D) $1,000 U
E) None of the above

Question 65

Use the following information to answer Questions below:
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the labor efficiency variance.

A) $2,000 F
B) $2,000 U
C) $2,050 F
D) $2,050 U
E) None of the above

Question 66

Use the following information to answer Questions below.
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the materials price variance.

A) $1,200 F
B) $1,200 U
C) $1,155 U
D) $1,155 F
E) None of the above

Question 67

Use the following information to answer Questions below.
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the materials efficiency variance.

A) $750 F
B) $750 U
C) $795 F
D) $795 U
E) None of the above

Question 68

Use the following information to answer Questions below.
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the labor rate variance.

A) $347 U
B) $347 F
C) $350 U
D) $350 F
E) None of the above

Question 69

Use the following information to answer Questions below.
The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:


-Determine the labor efficiency variance.

A) $597 U
B) $597 F
C) $600 U
D) $600 F
E) None of the above

Question 70

Use the following information to answer Questions below.
Kraig Fencing considers 4,000 direct labor hours or 100 fences to be its normal monthly capacity. Its standard variable overhead rate is $9 per direct labor hour. During the current month, $33,500 of variable overhead costs were incurred in working 3,800 direct labor hours to complete 92 fences.

-What is the variable overhead spending variance?

A) $700 U
B) $700 F
C) $2,500 U
D) $2,500 F
E) None of the above

Question 71

Use the following information to answer Questions below.
Kraig Fencing considers 4,000 direct labor hours or 100 fences to be its normal monthly capacity. Its standard variable overhead rate is $9 per direct labor hour. During the current month, $33,500 of variable overhead costs were incurred in working 3,800 direct labor hours to complete 92 fences.

-What is the variable overhead efficiency variance?

A) $1,080 U
B) $1,080 F
C) $1,800 U
D) $1,800 F
E) None of the above

Question 72

Use the following information to answer Questions below.
Kraig Fencing considers 4,000 direct labor hours or 100 fences to be its normal monthly capacity. Its standard variable overhead rate is $9 per direct labor hour. During the current month, $33,500 of variable overhead costs were incurred in working 3,800 direct labor hours to complete 92 fences.

-What is the total variable overhead flexible budget variance?

A) $380 U
B) $1,100 F
C) $1,420 F
D) $1,780 U
E) None of the above

Question 73

Use the following information to answer Questions below.
Phillips Fencing considers 6,000 direct labor hours or 200 fences to be its normal monthly capacity. Its standard variable overhead rate is $7 per direct labor hour. During the current month, $44,500 of variable overhead costs were incurred in working 6,200 direct labor hours to complete 215 fences.

-What is the variable overhead spending variance?

A) $1,100 F
B) $2,500 F
C) $1,100 U
D) $2,500 U
E) None of the above

Question 74

Use the following information to answer Questions below.
Phillips Fencing considers 6,000 direct labor hours or 200 fences to be its normal monthly capacity. Its standard variable overhead rate is $7 per direct labor hour. During the current month, $44,500 of variable overhead costs were incurred in working 6,200 direct labor hours to complete 215 fences.

-What is the variable overhead efficiency variance?

A) $1,400 U
B) $1,750 U
C) $1,400 F
D) $1,750 F
E) None of the above

Question 75

Use the following information to answer Questions below.
Phillips Fencing considers 6,000 direct labor hours or 200 fences to be its normal monthly capacity. Its standard variable overhead rate is $7 per direct labor hour. During the current month, $44,500 of variable overhead costs were incurred in working 6,200 direct labor hours to complete 215 fences.

-What is the total variable overhead flexible budget variance?

A) $300 F
B) $650 F
C) $1,100 F
D) $2,850 U
E) None of the above

Question 76

Use the following information to answer Questions below.
Landreth Fencing considers 3,000 direct labor hours or 50 fences to be its normal monthly capacity. Its standard variable overhead rate is $12 per direct labor hour. During the current month, $29,800 of variable overhead costs were incurred in working 2,950 direct labor hours to complete 45 fences.

-What is the variable overhead spending variance?

A) 5,600 F
B) 5,600 U
C) 6,200 F
D) 6,200 U
E) None of the above

Question 77

Use the following information to answer Questions below.
Landreth Fencing considers 3,000 direct labor hours or 50 fences to be its normal monthly capacity. Its standard variable overhead rate is $12 per direct labor hour. During the current month, $29,800 of variable overhead costs were incurred in working 2,950 direct labor hours to complete 45 fences.

-What is the variable overhead efficiency variance?

A) $600 U
B) $600 F
C) $3,000 U
D) $3,000 F
E) None of the above

Question 78

Use the following information to answer Questions below.
Landreth Fencing considers 3,000 direct labor hours or 50 fences to be its normal monthly capacity. Its standard variable overhead rate is $12 per direct labor hour. During the current month, $29,800 of variable overhead costs were incurred in working 2,950 direct labor hours to complete 45 fences.

-What is the total variable overhead flexible budget variance?

A) $2,600 F
B) $6,800 F
C) $5,000 U
D) $8,600 U
E) None of the above

Question 79

Use the following information to answer Questions below .
The following data relates to Koontz Corporation's operations for the month. 1,000 finished units of product were produced and the normal monthly capacity is 2,200 direct labor hours.


-What is the materials price variance?

A) $400 U
B) $400 F
C) $440 U
D) $440 F
E) None of the above

Question 80

Use the following information to answer Questions below .
The following data relates to Koontz Corporation's operations for the month. 1,000 finished units of product were produced and the normal monthly capacity is 2,200 direct labor hours.


-What is the materials efficiency variance?

A) $1,960 U
B) $1,960 F
C) $2,000 U
D) $2,000 F
E) None of the above